A funeral trust can be an essential planning tool for California residents who want to pre-fund their funeral expenses while potentially preserving Medicaid eligibility and ensuring their final wishes are carried out.
Understanding Funeral Trusts
Funeral trusts have an additional benefit: if you depend on Medicaid but are uncertain whether you fall below the program's asset limit, transferring funds to a funeral trust may preserve eligibility for continued benefits.
Two Types of Funeral Trusts in California
Funeral trusts can be divided into two main categories based on your level of control:
Irrevocable Funeral Trusts
When you establish an irrevocable funeral trust and transfer assets to its possession, they will be maintained by a trustee, and you cannot revoke or rescind the agreement.
Key advantages of irrevocable funeral trusts:
- Assets are removed from your countable resources for Medicaid eligibility
- Funds are protected from creditors
- Funeral expenses are guaranteed to be covered
- May provide estate tax benefits
Since you no longer have direct control over assets in an irrevocable funeral trust, you can exclude these assets when applying for Medicaid or a Medicaid extension.
Revocable Funeral Trusts
When you establish a revocable funeral trust, you maintain control of your assets and retain the right to terminate the trust whenever you choose. You can dissolve the contract at any time.
However, a revocable funeral trust will not help you maintain Medicaid benefits because you retain control over the assets.
Planning Considerations
Funeral trusts work well alongside other estate planning strategies, including living trusts and comprehensive elder law planning.
Our experienced team at Kavesh, Minor & Otis can help you determine whether a funeral trust fits into your overall estate plan and Medicaid planning strategy. Contact us to discuss your specific needs and goals.
